Q4 2023 Summary
Published Jan 10, 2025, 5:10 PM UTC- Johnson & Johnson's Oncology franchise is demonstrating strong growth with a promising pipeline, including advancements in CAR-T therapies for autoimmune diseases and interest in radiopharmaceuticals.
- The MedTech business delivered over $30 billion in sales, an all-time high, with expectations of procedure volumes remaining above pre-COVID levels into 2024, driven by a bolus of patients and new product launches such as the expansion of the VELYS Robotic-Assisted Solution.
- Electrophysiology segment showed extraordinary growth of 25% globally in Q4, driven by new product performance like the QDOT micro catheter, with positive expectations for continued strong growth in 2024.
- Margin Pressure in MedTech Due to Inflation and Unfavorable Product Mix: The company's MedTech margins declined by 400 basis points year-over-year in Q4 2023, even after excluding the impact of the Laminar acquisition. This decrease is primarily driven by inflationary impacts and an unfavorable product mix, particularly in orthopedics. Inflation is expected to impact margins into at least the first half of 2024. ,
- Declining Sales of Key Product XARELTO: XARELTO experienced a sales decline in Q4 2023 due to unfavorable patient mix and a one-time entry. The company expects a continued decline in XARELTO sales in 2024, which could negatively affect overall revenue.
- Potential Slowdown in Procedure Volumes Post-H1 2024: The company anticipates that the increased procedure volumes seen post-COVID-19, which have driven faster market growth in 2023, may not be sustainable beyond the first half of 2024. This could lead to slower growth in the MedTech segment after this period.
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M&A Strategy
Q: What's your M&A appetite and outlook, especially in MedTech?
A: Johnson & Johnson is well-positioned for M&A across sectors and sizes, focusing on strategic fits where they have expertise. They recently acquired Abiomed for $17 billion , which is performing better than expected and fitting well into their portfolio. They continue to explore opportunities in areas that complement their existing portfolio, including cardiovascular devices, robotics, orthopedics, and pharmaceuticals. -
MedTech Margins
Q: How should we think about gross margins in 2024 and beyond?
A: Inflationary pressures have impacted margins due to higher inventory costs flowing through the P&L. Johnson & Johnson doesn't see incremental inflation but expects this impact to continue through the first half of 2024. They are working on cost improvement initiatives across the MedTech portfolio to improve profitability. -
CARVYKTI Update
Q: What's the outlook for CARVYKTI, including the ODAC panel and supply?
A: CARVYKTI is the fastest-launching CAR-T therapy, with over 2,000 patients treated. Johnson & Johnson is confident in its risk-benefit profile and its potential to be a $5 billion-plus asset at peak sales. They look forward to reviewing data with the FDA's ODAC panel and anticipate a PDUFA date on April 5. Manufacturing capacity has doubled, and they are increasing production, including expanding facilities in Europe and the U.S., to meet demand in 2024. -
Procedure Volumes
Q: Why expect 2024 procedure volumes to remain above pre-COVID levels?
A: A backlog of patients post-COVID-19 has led to faster market growth in 2023, which is expected to continue into at least the first half of 2024. Johnson & Johnson sees this as a tailwind for their MedTech business, along with several product catalysts such as the adoption of Impella 5.5 in heart recovery and expansion of the VELYS Robotic-Assisted Solution. -
Electrophysiology Outlook
Q: How should we view the EP franchise for 2024?
A: The electrophysiology franchise had strong growth in 2023, with global sales up 25% in Q4 and 22% growth in the U.S.. New products like the CARTO mapping system and QDOT Micro catheter contributed to growth. Johnson & Johnson expects continued strong growth in 2024, with their PFA catheters submitted for regulatory approvals and innovations like VARIPULSE being launched globally. -
Orthopedics Impact
Q: What's the potential impact of Novo's osteoarthritis data on orthopedic utilization?
A: Johnson & Johnson continues to see increased procedure volumes in orthopedics and does not anticipate changes due to osteoarthritis data. They are optimistic about their orthopedics business, driven by new products like the VELYS Robotic-Assisted Solution, which has performed over 30,000 procedures with positive feedback. -
Oncology Expansion
Q: Any thoughts on CAR-Ts for autoimmune diseases and radiopharmaceuticals?
A: Johnson & Johnson is exploring CAR-T therapies in autoimmune diseases, with early promising data from partnerships, such as a deal involving CD19 and CD20 biCAR. They are interested in radiopharmaceuticals and have deals like the one with Nanobiotics for a radio enhancer in head and neck cancer. -
PAH Franchise
Q: What's driving success in the PAH franchise, and plans for future focus?
A: The PAH franchise grew in the high teens in 2023 due to improved patient mix and market growth post-COVID. They are launching a combination therapy of macitentan and Tadalafil, expected to be approved in 2024. They are exploring opportunities to continue success in this area. -
XARELTO Patient Mix
Q: Explain the impact of patient mix on XARELTO performance.
A: XARELTO experienced a decline due to patient mix and a one-time entry in Q4. A further decline is expected in 2024 but not to the same extent. -
MedTech Margins in Q4
Q: Could you explain the MedTech margin decline in Q4?
A: The Q4 margin decline was primarily due to inflationary impacts and mix, with orthopedics performing better but being a lower-margin business. The acquisition of Laminar also affected margins, accounting for about 5 percentage points of a 9% drop in Q4. Johnson & Johnson is not concerned about the outlook and is working on cost improvements. -
Pharma M&A Focus
Q: What has held J&J back in pharma M&A, and will we see more?
A: Johnson & Johnson prefers deals where they can leverage their clinical development, manufacturing, and commercial capabilities, often at earlier stages. They continue to look for opportunities that can create value, as seen with recent smaller deals in pharmaceuticals, such as with CMB for CAR-T therapies.